The following bond transactions occurred during 2009 for the University of Higher Learning (UHL) and Otutye Ltd.:

Feb. 1 UHL issued $10 million of five-year, 8% bonds at face value which pay interest semi-annually on August 1 and February 1.

Feb. 1 Otutye Ltd. purchased $3 million of UHL's bonds at 98 as a short-term AFS investment. The purchase price was based on a market interest rate of 8.5%.

Aug. 1 The semi-annual interest on the bonds was paid

Aug.1 After paying the semi-annual interest on the bonds on this date, UHL decided to repurchase $3 million of its bonds to retire them. UHL repurchased all $3 million of the bonds from Otutye at 99.

Instructions:

a) Prepare all required journal entries for Otutye Ltd., the investor, to record the above transactions.

b) Prepare all required entries for UHL, the investee, to record the above transactions.

c) Comment on the differences in recording that you observe between the investor and the investee.